Amid all the challenges of the past several months, corporate and private investor appetite for deals has remained strong, and that doesn’t appear to be changing anytime soon. We expected M&A to be resilient during a recession and deal activity to recover faster than the economy, but the pace and magnitude still are remarkable given the turmoil of the COVID-19 crisis. For instance, US deal value in Q1 2021 was the highest ever, according to a PwC analysis of Refinitiv data, and the 34 megadeals (transactions of at least $5 billion) were the most in several years.
So what’s next? In our latest CEO survey, 57% of the US executives responding told us their companies plan to increase M&A investment in 2021. Where should they focus their efforts in this still-uncertain climate? To help answer that question, Fareed Zakaria—host of CNN’s “GPS” program and author of Ten Lessons from a Post-Pandemic World—joined our recent Deals Exchange for a conversation on dealmaking in a fast-forward world.
Fareed noted that the pandemic has been broader and deeper than other recent crises, and that the past year has amplified and accelerated many geopolitical, economic, regulatory and social challenges. Many of these challenges can influence deal strategies and the work it takes to ensure deals generate the value you expect. Talking with Fareed and our clients, I was struck by three things that I think will be critical for those considering deals in the years ahead.
Fareed Zakaria, CNN host and author of Ten Lessons from a Post-Pandemic World, and Colin Wittmer, PwC US Deals Leader, discuss how the COVID-19 pandemic has led companies to consider different solutions beyond just growing profits. PwC's Deals Exchange, April 22, 2021.
Fareed Zakaria, CNN host and author of Ten Lessons from a Post-Pandemic World, and Colin Wittmer, PwC US Deals Leader, discuss how digital transformation was accelerated by the COVID-19 pandemic. PwC's Deals Exchange, April 22, 2021.
The competition for assets can be fierce in the current climate, and the right deal may not necessarily be M&A. It could be a strategic divestiture that provides substantial capital for reinvestment in a core capability or a partnership with a company in an adjacent sector. Whatever the route, companies that learn from the past year and recognize what’s fundamentally different now will have a better chance of making deals that deliver value.